Oil surged above $77 a barrel in Europe after BP began shutting an Alaskan field that pumps 8% of US crude and anxiety over the Middle East, supplier of almost a third of the world’s oil, ran high.
London Brent crude climbed as much as 2% to $77,73 a barrel, within reach of its all-time high of $78,18, on expectations that the USwould scour European markets for replacement oil. In early trade it was up $1,17 at $77,34.
US crude was up $1,59 at $76,35, off a $76,55 high. It hit a record $78,40 last month.
"The BP field is a sizeable stream. The world is already concerned about supplies and this is just adding to concerns," said Tony Nunan, a risk manager at Mitsubishi in Tokyo.
BP said yesterday it was shutting down indefinitely the Prudhoe Bay oil field in Alaska, cutting production by 400 000 barrels a day. The closure was due to the discovery of severe corrosion and a tiny spill from a Prudhoe Bay oil transit line, BP said.
"This latest setback to global oil production comes in the context of a relatively tight oil market," analysts at BNP Paribas said in a research note.
"In this environment we maintain our forecast for Brent crude of $77 a barrel this quarter, and so implicitly expect prices to move above $80 a barrel at some point this quarter."
Analyst Jim Ritterbusch of Ritterbusch and Associates in Galena Illinois said the US could cover the lost output with imported oil. The US is the world’s biggest oil consumer by far, using 25% of its crude.
Tensions in the Middle East rose after Iran again invoked its oil exports for political leverage and Lebanon rejected a draft UN resolution meant to end the war between Israel and Hizbollah, delaying its vote.
A further spike in oil prices resulting from a broader Middle East conflict would drag an already slowing US economy into recession more easily now than a year ago, Standard & Poor’s said today.
The credit ratings agency forecast three scenarios — with a $250 oil barrel sparking global recession in the worst of them, should Iran close the Strait of Hormuz, a bottleneck in the Gulf region between Iran and Oman by which tankers from Kuwait, Saudi Arabia and the United Arab Emirates transit.
But the most likely scenario, based on a limited conflict, has prices falling from current $75 levels to below $70 by year-end and to $60 by end-2008, which would allow the world economy to keep expanding, with U.S. growth slowing to 2.5 percent in 2007, S&P said.
Iran, the fourth-largest oil exporter, vowed on Sunday to expand its atomic fuel work and warned of a harsh response if the United Nations imposed sanctions aimed at halting enrichment.
"If they do (impose sanctions), we will react in a way that would be painful for them," said Tehran’s chief nuclear negotiator Ali Larijani.
"We do not want to use the oil weapon, it is they who would impose it upon us," he told a news conference, adding Iran would expand the number of atomic centrifuges it was running.
Hopes to move forward today with a draft UN resolution to end the war were dashed after Lebanon asked the Security Council to call for a quick withdrawal of Israeli troops, dividing council members, and the US and France are expected to present a revised text.
London Brent crude climbed as much as 2% to $77,73 a barrel, within reach of its all-time high of $78,18, on expectations that the USwould scour European markets for replacement oil. In early trade it was up $1,17 at $77,34.
US crude was up $1,59 at $76,35, off a $76,55 high. It hit a record $78,40 last month.
"The BP field is a sizeable stream. The world is already concerned about supplies and this is just adding to concerns," said Tony Nunan, a risk manager at Mitsubishi in Tokyo.
BP said yesterday it was shutting down indefinitely the Prudhoe Bay oil field in Alaska, cutting production by 400 000 barrels a day. The closure was due to the discovery of severe corrosion and a tiny spill from a Prudhoe Bay oil transit line, BP said.
"This latest setback to global oil production comes in the context of a relatively tight oil market," analysts at BNP Paribas said in a research note.
"In this environment we maintain our forecast for Brent crude of $77 a barrel this quarter, and so implicitly expect prices to move above $80 a barrel at some point this quarter."
Analyst Jim Ritterbusch of Ritterbusch and Associates in Galena Illinois said the US could cover the lost output with imported oil. The US is the world’s biggest oil consumer by far, using 25% of its crude.
Tensions in the Middle East rose after Iran again invoked its oil exports for political leverage and Lebanon rejected a draft UN resolution meant to end the war between Israel and Hizbollah, delaying its vote.
A further spike in oil prices resulting from a broader Middle East conflict would drag an already slowing US economy into recession more easily now than a year ago, Standard & Poor’s said today.
The credit ratings agency forecast three scenarios — with a $250 oil barrel sparking global recession in the worst of them, should Iran close the Strait of Hormuz, a bottleneck in the Gulf region between Iran and Oman by which tankers from Kuwait, Saudi Arabia and the United Arab Emirates transit.
But the most likely scenario, based on a limited conflict, has prices falling from current $75 levels to below $70 by year-end and to $60 by end-2008, which would allow the world economy to keep expanding, with U.S. growth slowing to 2.5 percent in 2007, S&P said.
Iran, the fourth-largest oil exporter, vowed on Sunday to expand its atomic fuel work and warned of a harsh response if the United Nations imposed sanctions aimed at halting enrichment.
"If they do (impose sanctions), we will react in a way that would be painful for them," said Tehran’s chief nuclear negotiator Ali Larijani.
"We do not want to use the oil weapon, it is they who would impose it upon us," he told a news conference, adding Iran would expand the number of atomic centrifuges it was running.
Hopes to move forward today with a draft UN resolution to end the war were dashed after Lebanon asked the Security Council to call for a quick withdrawal of Israeli troops, dividing council members, and the US and France are expected to present a revised text.
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